A divorce attorney asks:
In North Carolina, all assets tend to be treated equally in court—whether that’s a house, retirement account, or pile of cash. But in reality, those assets have very different present values. When I’m advising clients who are still years from retirement, what types of assets are more or less valuable if they want to maximize short- and long-term outcomes?
You’re absolutely right to question the assumption that all million-dollar assets are created equal. A brokerage account, an IRA, a house, and a CD might all carry the same sticker price, but their actual value—especially in divorce—is very different once you consider taxes, liquidity, and timing.
Time Value of Money Matters
The first and most important financial concept here is present value. A million dollars today is worth more than a million dollars ten years from now—because of inflation, investment opportunity cost, and risk. But many settlement agreements overlook this. A spouse who receives a series of alimony payments over 15 years may be awarded what appears to be “a million dollars,” but the true value is much less once future payments are discounted to today’s dollars.
Tax Treatment Can Drastically Change Value
Assets with identical face values can differ dramatically depending on tax treatment.
- A million-dollar Roth IRA or brokerage account is worth a full million, post-tax.
- A traditional IRA or 401(k) will be taxed upon withdrawal, reducing its net value—sometimes by as much as 30% or more depending on income and future tax brackets.
- Appreciated stock might be subject to capital gains tax on sale.
Always apply an appropriate tax discount to reflect true post-tax value.
Liquidity and Access Matter Too
Some assets simply aren’t as usable. A million dollars in a checking account is fundamentally more flexible than a million-dollar vacation home that takes months to sell and comes with fees. You should apply a liquidity discount to harder-to-access assets—especially things like real estate, private businesses, or collectibles.
For example:
- A $500,000 property with 10% selling costs and time delays might only be worth $400,000 in practical terms.
- A retirement account locked up until age 59½ comes with penalties for early access that must be considered.
Strategy: Discount and Equalize Fairly
A more accurate way to compare assets in divorce is to:
- Discount future payments to present value
- Apply tax discounts to pre-tax accounts
- Apply liquidity discounts to hard-to-sell or restricted assets
That’s what gives your clients a clearer view of what they’re really getting. If one party walks away with liquid assets and the other with retirement accounts or illiquid real estate, the totals might match on paper—but not in purchasing power.
Final Thoughts
Fair doesn’t always mean equal, and valuing assets properly in a divorce takes more than just adding up account balances. When you account for taxes, liquidity, and time, a million-dollar IRA is often worth a lot less than a million-dollar brokerage account or pile of cash.
For more perspective on dividing assets in divorce, listen to the full podcast episode here.